Drop in China beef prices not expected to last

It is difficult to see any real reason for panic over the sudden pre-Christmas reduction in demand for sheepmeat and beef from Chinese importers which has led to prices coming off their peak. Livestock suppliers will already have noticed a drop in schedules from the elevated levels processors had been paying over the first couple of months of the season. It’s tempting to fear the worst given past experience with high prices paid by meat processors which have inevitably been followed by a sudden crash and a long slow recovery.

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Trade outlook still bright, but not without challenges

Vangelis Vitalis, Deputy Secretary for trade at MFAT and chief negotiator for the CPTPP due to take effect early next year, gave a very thorough and enthralling presentation on the trade landscape to the Red Meat Sector Conference in Napier on Monday. Free trade and market access are a key area of interest to the New Zealand meat industry and the economy as a whole.

Past, present and future of the meat industry (Part 2)

Present

Today’s industry has many of the same characteristics as the mid 1980s, but a number of things have changed, mostly for the better.

Exit from EU could cripple UK agriculture

A new report by agricultural consultancy Agra Europe entitled Preparing for Brexit suggests leaving the EU, to be determined by a referendum in 2017, could destroy the British farming sector. The authors have based their forecast on the Coalition government’s 2013 Fresh Start Policy document which theorised that British agriculture could imitate New Zealand and Australia’s success in surviving, even flourishing, in a post-subsidy world.

Changing beef outlook

There have been some interesting beef market developments in recent days.

 

Of immediate interest is the news of a forecast excess of US exports over production in the second half of the year as against a relatively small increase in production, reported in the USDA livestock supply and demand report which was released yesterday.

 

This leads to a prediction of firmer prices for lean beef, although this will coincide with the seasonal downturn in New Zealand production. Australia is expected to be in a good position to take advantage of this situation.

 

The other item of interest is the bi-lateral trade agreement between Japan and Australia which will reduce the tariff on frozen beef from 38.5% to 19.5% over 18 years and on fresh beef to 23.5% over 15 years.

 

While this may appear to be unduly slow, all other countries’ beef tariffs will remain at the 38.5% rate, until or unless the TPP agreement is concluded. It would be difficult for Japan to expect to negotiate a less favourable deal with signatories to the TPP, and if more favourable the terms of the Australian FTA would be amended to match it.

 

In the meantime New Zealand’s beef exports to Japan will have to compete with Australian product at gradually decreasing tariff rates.

 

What is significant here is that the FTA has taken seven years to negotiate, but indicates an increasing willingness to open up the fiercely protective Japanese agricultural sector under pressure from Prime Minister Shinzo Abe. Cheese has also benefited under the terms of the FTA with Australia permitted to export a further 20,000 tonnes.

 

Japan has a highly protected and subsidised farm sector, particularly in the areas of rice, beef, pork, dairy, and sugar and its powerful farm lobby has long resisted any efforts to liberalise trade in those products. It will be fascinating to see how successful Abe is in encouraging more concessions in pursuit of the TPP.

 

Equally he could find himself going down the path taken by all Prime Ministers of recent years which has seen Japanese trade policy stagnate in the face of opposition and an inability to get reform measures through the Japanese parliament.

Free Trade Agreements not all they’re cracked up to be

There are two views about free trade agreements (FTAs) – they’re either unreservedly positive for New Zealand’s exports, because all other countries have higher tariffs than we do, or they’re full of potential fish hooks. These opposing views can’t both be right, but on closer examination there are elements of truth to them both.